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Newfield Reports Second Quarter 2010 Results

HOUSTON, July 22, 2010 /PRNewswire via COMTEX/ --

Newfield Exploration Company (NYSE: NFX) today reported its unaudited second quarter 2010 financial results. A separate operational update was released on July 21 and this release and the operational update release are available through the investor relations section of the Company's website. Newfield will host a conference call at 8:30 a.m. (CDT) on Friday, July 23. To participate in the call, dial 719-325-2187 or listen through the investor relations section of the website at http://www.newfield.com.

For the second quarter of 2010, Newfield recorded net income of $96 million, or $0.72 per diluted share (all per share amounts are on a diluted basis). Net income includes the effect of these items:

  • a net unrealized loss on commodity derivatives of $71 million ($45 million after-tax); and
  • an early redemption premium of $2 million ($1 million after-tax) associated with the purchase and payment of the remaining $32 million of our $175 million aggregate principal amount of 7 5/8% Senior Notes due 2011. All of these notes have now been redeemed.

Without the effect of these items, net income for the second quarter of 2010 would have been $142 million, or $1.06 per share.

Revenues in the second quarter of 2010 were $448 million. Net cash provided by operating activities before changes in operating assets and liabilities was $383 million. See "Explanation and Reconciliation of Non-GAAP Financial Measures" found after the financial statements in this release.

Newfield's production in the second quarter of 2010 was 73 Bcfe, or 9% over first quarter 2010 production. Natural gas production in the second quarter of 2010 was 51 Bcf, an average of 564 MMcf/d. Newfield's oil liftings in the second quarter of 2010 were 3.6 MMBbls, an average of approximately 40,000 BOPD. Capital expenditures in the second quarter of 2010 were approximately $441 million.

On July 8, Newfield's credit rating was raised to investment grade BBB- with a stable outlook by Standard & Poor's. The Company's subordinated debt rating from S&P remains BB+. The Company currently has a Ba2 credit rating from Moody's Investor Services and a BB+ rating from Fitch Ratings.

Newfield Exploration Company is an independent crude oil and natural gas exploration and production company. The Company relies on a proven growth strategy of growing reserves through an active drilling program and select acquisitions. Newfield's domestic areas of operation include the Mid-Continent, the Rocky Mountains, onshore Texas and the Gulf of Mexico. The Company has international operations in Malaysia and China.

**This release contains forward-looking information. All information other than historical facts included in this release, such as information regarding estimated or anticipated third quarter and full year 2010 results, estimated capital expenditures, cash flow, production and cost reductions, drilling and development plans and the timing of activities and liftings, is forward-looking information. Although Newfield believes that these expectations are reasonable, this information is based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. Actual results may vary significantly from those anticipated due to many factors, including drilling results, oil and gas prices, industry conditions, the prices of goods and services, the availability of drilling rigs and other support services, the availability of refining capacity for the crude oil Newfield produces from its Monument Butte field in Utah, the availability and cost of capital resources, labor conditions and severe weather conditions (such as hurricanes). In addition, the drilling of oil and gas wells and the production of hydrocarbons are subject to governmental regulations and operating risks.


    For information, contact:
    Investor Relations: Steve Campbell (281) 847-6081
    Media Relations: Keith Schmidt (281) 674-2650
    Email: info@newfield.com



    2Q10 Actual Results
                                               2Q10 Actual
                                         Domestic   Int'l   Total

    Production/Liftings
        Natural gas - Bcf                  51.3        -    51.3
        Oil and condensate - MMBbls         2.1      1.5     3.6
        Total Bcfe                         64.0      8.9    72.9

     Average Realized Prices Note 1
        Natural gas - $/Mcf               $5.47 $      -   $5.47
        Oil and condensate - $/Bbl       $84.90   $72.90  $79.94
        Mcf equivalent - $/Mcfe           $7.25   $12.15   $7.86

    Operating Expenses:
      Lease operating
        Recurring ($MM)                   $36.4    $12.2   $48.6
          per/Mcfe                        $0.58    $1.36   $0.68
        Transportation ($MM)              $20.0 $      -   $20.0
          per/Mcfe                        $0.32 $      -   $0.28
        Recurring w/ trans ($MM)          $56.4    $12.2   $68.6
          per/Mcfe                        $0.90    $1.36   $0.96
        Major (workovers, etc.) ($MM)     $15.1     $0.7   $15.8
          per/Mcfe                        $0.24    $0.08   $0.22

      Production and other taxes
       ($MM)                              $15.1    $16.1   $31.2
         per/Mcfe                         $0.24    $1.80   $0.43

      General and administrative
       (G&A), net ($MM)                   $38.5     $2.5   $41.0
         per/Mcfe                         $0.61    $0.28   $0.57

            Capitalized internal costs
               ($MM)                                      $(15.2)
                per/Mcfe                                  $(0.21)

    Interest expense ($MM)                                 $39.6
          per/Mcfe                                         $0.55

    Capitalized interest ($MM)                            $(15.4)
          per/Mcfe                                        $(0.21)

    Note 1: Average realized prices include the effects of hedging
            contracts. If the effects of these contracts were
            excluded, the average realized price for total gas would
            have been $3.88 per Mcf and the total oil and condensate
            average realized price would have been $69.72 per barrel.



    3Q10 & FY10 Estimates
                                  3Q10 & FY10 Estimates
                                                  Domestic
    Production/Liftings                     3QE               FY10
                                            ---               ----
       Natural gas - Bcf                     50 - 52        200 - 202
       Oil and condensate -
        MMBbls Note 1                       2.3 - 2.5       8.8 - 9.2
       Total Bcfe                            64 - 67        253 - 257

    Average Realized Prices
       Natural gas - $/Mcf                   Note 2            Note 2
       Oil and condensate -
        $/Bbl                                Note 3            Note 3
       Mcf equivalent - $/Mcfe

    Operating Expenses:
      Lease operating
        Recurring ($MM)                     $33 - $40      $141 - $147
          per/Mcfe                        $0.54 - $0.58   $0.55 - $0.58
        Transportation ($MM)                $17 - $21       $72 - $75
          per/Mcfe                        $0.28 - $0.31   $0.28 - $0.30
        Recurring w/ trans ($MM)            $50 - $61      $213 - $222
          per/Mcfe                        $0.82 - $0.89   $0.83 - $0.89
        Major (workovers, etc.)
         ($MM)                              $10 - $13       $35 - $43
          per/Mcfe                        $0.16 - $0.18   $0.14 - $0.16

      Production/Taxes
       ($MM)Note 5                          $15 - $18       $57 - $70
         per/Mcfe                         $0.24 - $0.26   $0.24 - $0.26

      G&A, net ($MM)                        $35 - $42      $143 - $158
        per/Mcfe                          $0.58 - $0.60   $0.59 - $0.61

        Capitalized internal
         costs ($MM)
          per/Mcfe

    Interest expense ($MM)
          per/Mcfe

    Capitalized interest
     ($MM)
          per/Mcfe

    Tax rate (%)Note 6

    Income taxes (%)
      Current
      Deferred


                                  3Q10 & FY10 Estimates
                                                  Int'l
    Production/Liftings                     3QE               FY10
                                            ---               ----
       Natural gas - Bcf                     -                  -
       Oil and condensate -
        MMBbls Note 1                    1.0 - 1.1          5.0 - 5.2
       Total Bcfe                          6 - 7             30 - 31

    Average Realized Prices
       Natural gas - $/Mcf
       Oil and condensate -
        $/Bbl                             Note 4             Note 4
       Mcf equivalent - $/Mcfe

    Operating Expenses:
      Lease operating
        Recurring ($MM)                   $9 - $11          $38 - $47
          per/Mcfe                     $1.47 - $1.53      $1.38 - $1.43
        Transportation ($MM)                 -                  -
          per/Mcfe                           -                  -
        Recurring w/ trans ($MM)          $9 - $11          $38 - $47
          per/Mcfe                     $1.47 - $1.53      $1.38 - $1.43
        Major (workovers, etc.)
         ($MM)                            $4 - $6            $9 - $10
          per/Mcfe                     $0.77 - $0.81      $0.30 - $0.32

      Production/Taxes
       ($MM)Note 5                       $10 - $13          $44 - $54
         per/Mcfe                      $1.77 - $1.81      $1.60 - $1.63

      G&A, net ($MM)                      $1 - $2            $6 - $7
        per/Mcfe                       $0.19 - $0.21      $0.19 - $0.20

        Capitalized internal
         costs ($MM)
          per/Mcfe

    Interest expense ($MM)
          per/Mcfe

    Capitalized interest
     ($MM)
          per/Mcfe

    Tax rate (%)Note 6

    Income taxes (%)
      Current
      Deferred


                                  3Q10 & FY10 Estimates
                                                 Total
    Production/Liftings                    3QE               FY10
                                           ---               ----
       Natural gas - Bcf                 50 - 52          200 - 202
       Oil and condensate -
        MMBbls Note 1                   3.3 - 3.6        13.8 - 14.4
       Total Bcfe                        70 - 74          283 - 288

    Average Realized Prices
       Natural gas - $/Mcf
       Oil and condensate -
        $/Bbl
       Mcf equivalent - $/Mcfe

    Operating Expenses:
      Lease operating
        Recurring ($MM)                 $42 - $51        $179 - $194
          per/Mcfe                    $0.63 - $0.67     $0.64 - $0.68
        Transportation ($MM)            $17 - $21         $72 - $75
          per/Mcfe                    $0.25 - $0.28     $0.25 - $0.28
        Recurring w/ trans ($MM)        $59 - $72        $251 - $269
          per/Mcfe                    $0.88 - $0.95     $0.89 - $0.96
        Major (workovers, etc.)
         ($MM)                          $14 - $19         $44 - $53
          per/Mcfe                    $0.22 - $0.24     $0.16 - $0.18

      Production/Taxes
       ($MM)Note 5                      $25 - $31        $101 - $124
         per/Mcfe                     $0.38 - $0.40     $0.38 - $0.41

      G&A, net ($MM)                    $36 - $44        $149 - $165
        per/Mcfe                      $0.54 - $0.56     $0.54 - $0.56

        Capitalized internal
         costs ($MM)                   ($18 - $22)       ($67 - $82)
                                     ($0.27 - $0.28)   ($0.26 - $0.27)
          per/Mcfe

    Interest expense ($MM)              $35 - $43        $140 - $171
          per/Mcfe                    $0.53 - $0.54     $0.54 - $0.55

    Capitalized interest
     ($MM)                             ($10 - $12)       ($45 - $55)
          per/Mcfe                   ($0.15 - $0.16)   ($0.17 - $0.18)


    Tax rate (%)Note 6                  36% - 38%         36% - 38%

    Income taxes (%)
      Current                           14% - 16%         14% - 16%
      Deferred                          84% - 86%         84% - 86%


    Note 1: Includes 0.5 - 0.6 MMBbls of deferred Malaysian oil
            Production associated with a damaged export pipeline.

    Note 2: The price that we receive for natural gas production
            from the Gulf of Mexico and onshore Gulf Coast, after
            basis differentials, transportation and handling charges,
            typically averages $0.25 - $0.50 per MMBtu less than the
            Henry Hub Index.  Realized natural gas prices for our
            Mid-Continent properties, after basis differentials,
            transportation and handling charges, typically average 85-90% of
            the Henry Hub Index.

    Note 3: The price we receive for our Gulf Coast oil production typically
            averages about 90-95% of the NYMEX West Texas Intermediate (WTI)
            price. The price we receive for our oil production in the Rocky
            Mountains is currently averaging about $12-$14 per barrel below
            the WTI price. Oil production from our Mid-Continent properties
            typically averages 88-92% of the WTI price.

    Note 4: Oil sales from our operations in Malaysia typically sell at a
            slight discount to Tapis, or about 90-95% of WTI. Oil sales
            from our operations in China typically sell at $4-$6 per barrel
            less than the WTI price.

    Note 5: Guidance for production taxes determined using $75/Bbl oil and
            $4.50/MMBtu gas.

    Note 6: Tax rate applied to earnings excluding unrealized gains or
            losses on commodity derivatives.



    CONSOLIDATED STATEMENT OF INCOME
    (Unaudited, in millions, except
     per share data)                               For the        For the
                                                Three Months    Six Months
                                                    Ended         Ended
                                                  June 30,       June 30,
                                                  --------       --------
                                                2010    2009    2010  2009
                                                ----    ----    ----  ----

    Oil and gas revenues                        $448    $287   $906    $549
                                                ----    ----   ----    ----

    Operating expenses:
      Lease operating                             84      57    151     128
      Production and other taxes                  31      15     56      24
      Depreciation, depletion and amortization   160     137    307     296
      General and administrative                  41      34     77      66
       Ceiling test writedown                      -       -      -   1,344
      Other                                        2       5     10       7
                                                 ---     ---    ---     ---
         Total operating expenses                318     248    601   1,865
                                                 ---     ---    ---   -----

    Income (loss) from operations                130      39    305  (1,316)

    Other income (expenses):
      Interest expense                           (39)    (32)   (77)    (64)
      Capitalized interest                        16      12     28      26
      Commodity derivative income (expense)       46     (81)   283     197
      Other                                       (1)      2      1       5
                                                 ---     ---    ---     ---
         Total other income (expenses)            22     (99)   235     164
                                                 ---     ---    ---     ---

    Income (loss) before income taxes            152     (60)   540  (1,152)

    Income tax provision (benefit)                56     (21)   200    (419)
                                                 ---     ---    ---    ----

    Net income (loss)                            $96    $(39)  $340   $(733)
                                                 ===    ====   ====   =====

    Income (loss) per share:
    Basic --                                   $0.73  $(0.30) $2.59  $(5.66)
                                               =====  ======  =====  ======

    Diluted --                                 $0.72  $(0.30) $2.55  $(5.66)
                                               =====  ======  =====  ======

    Weighted average number of shares
     outstanding                                 132     130    131     129
       for basic income (loss) per share
    Weighted average number of shares
     outstanding                                 134     130    133     129
    ---------------------------------            ---     ---    ---     ---
       for diluted income (loss) per share *
       -------------------------------------

    * Had we recognized net income for the three and six month periods ended
      June 30, 2009, the weighted average number of shares outstanding for
      the computation of diluted earnings per share would have increased by
      2 million shares.



    CONDENSED CONSOLIDATED BALANCE SHEET
    (Unaudited, in millions)


                                                 June 30,    December 31,
                                                 --------    ------------
                                                       2010          2009
                                                       ----          ----

    ASSETS
    Current assets:
      Cash and cash equivalents                        $122           $78
      Derivative assets                                 278           269
      Other current assets                              504           546
         Total current assets                           904           893

    Property and equipment, net (full cost
     method)                                          5,949         5,247
    Derivative assets                                    61            19
    Other assets                                         94            95
         Total assets                                $7,008        $6,254
                                                     ======        ======

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities                                $921          $873

    Other liabilities                                   188           142
    Long-term debt                                    2,169         2,037
    Deferred taxes                                      602           434
         Total long-term liabilities                  2,959         2,613
                                                      -----         -----

    Commitments and contingencies                         -             -

    STOCKHOLDERS' EQUITY
    Common stock                                          1             1
    Additional paid-in capital                        1,418         1,389
    Treasury stock                                      (40)          (33)
    Accumulated other comprehensive loss                (13)          (11)
    Retained earnings                                 1,762         1,422
                                                      -----         -----
      Total stockholders' equity                      3,128         2,768
                                                      -----         -----
      Total liabilities and stockholders' equity     $7,008        $6,254
                                                     ======        ======





    CONDENSED CONSOLIDATED STATEMENT OF CASH
     FLOWS
    (Unaudited, in millions)


                                                         For the
                                                     Six Months Ended
                                                          June 30,
                                                          --------
                                                    2010             2009
                                                    ----             ----
    Cash flows from operating activities:
      Net income (loss)                             $340            $(733)
    Adjustments to reconcile net income (loss)
     to net cash provided by operating activities:
       Depreciation, depletion and amortization      307              296
       Deferred tax provision (benefit)              173             (420)
       Stock-based compensation                       12               15
       Ceiling test writedown                          -            1,344
       Commodity derivative income                  (283)            (197)
       Cash receipts on derivative settlements       227              459
                                                     776              764
      Changes in operating assets and liabilities    112              (52)
                                                     ---              ---
          Net cash provided by operating activities  888              712
                                                     ---              ---

    Cash flows from investing activities:
      Additions to oil and gas properties and
       other, net                                   (774)            (781)
      Acquisitions of oil and gas properties        (219)              (9)
      Proceeds from sales of oil and gas
       properties                                     14                -
      Redemptions of investments                       5               14
          Net cash used in investing activities     (974)            (776)
                                                    ----             ----

    Cash flows from financing activities:
      Net proceeds (repayments) under credit
       arrangements                                 (385)              78
      Net proceeds from issuance of senior
       subordinated notes                            686                -
      Repayment of senior notes                     (175)               -
      Other                                            4                -
        Net cash provided by financing activities    130               78
                                                     ---              ---


    Increase in cash and cash equivalents             44               14
    Cash and cash equivalents, beginning of
     period                                           78               24

    Cash and cash equivalents, end of period        $122              $38
                                                    ====              ===



Explanation and Reconciliation of Non-GAAP Financial Measures

Earnings Stated Without the Effect of Certain Items

Earnings stated without the effect of certain items is a non-GAAP financial measure. Earnings without the effect of these items are presented because they affect the comparability of operating results from period to period. In addition, earnings without the effect of these items are more comparable to earnings estimates provided by securities analysts.

A reconciliation of earnings for the second quarter of 2010 stated without the effect of certain items to net income is shown below:



                                                             2Q10
                                                             ----
                                                         (in millions)
    Net income                                                $96
       Net unrealized loss on commodity derivatives (1)        71
       Early redemption charge                                  2
       Income tax adjustment for above items                  (27)
    Earnings stated without the effect of the above items    $142
                                                             ====

    (1) The determination of "Net unrealized loss on commodity
        derivatives" for the second quarter of 2010 is as follows:



                                                                 2Q10
                                                                 ----
                                                             (in millions)
        Commodity derivative income                               $46
        Cash receipts on derivative settlements                  (124)
        Option premiums associated with derivatives settled         7
          during the period                                       ---
          Net unrealized loss on commodity derivatives           $(71)
                                                                 ====



Net Cash Provided by Operating Activities Before Changes in Operating Assets and Liabilities

Net cash provided by operating activities before changes in operating assets and liabilities is presented because of its acceptance as an indicator of an oil and gas exploration and production company's ability to internally fund exploration and development activities and to service or incur additional debt. This measure should not be considered as an alternative to net cash provided by operating activities as defined by generally accepted accounting principles.

A reconciliation of net cash provided by operating activities before changes in operating assets and liabilities to net cash provided by operating activities is shown below:



                                                             2Q10
                                                             ----
                                                          (in millions)
    Net cash provided by operating activities                $474
       Net change in operating assets and liabilities         (91)
                                                              ---
    Net cash provided by operating activities before
     changes in operating assets and liabilities             $383
                                                             ====



SOURCE Newfield Exploration Company

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